What recourse do U.S. industries have to protect themselves from being undercut by importers? BedTimes offers this overview of the process the U.S. government follows to protect manufacturers from unfair pricing practices
On May 14, the U.S. International Trade Commission made a preliminary determination that there is a “reasonable indication” that the U.S. mattress industry has been materially injured by imports of finished mattresses from eight countries — Cambodia, Indonesia, Malaysia, the People’s Republic of China, Serbia, Thailand, Turkey and Vietnam.
And, with that finding, the U.S. Department of Commerce now is conducting its own preliminary investigation into whether China has been unfairly subsidizing its mattress exports to the United States and whether companies in the other seven countries have been “dumping” mattresses, or selling at them unfair prices, in the U.S. market.
It’s the next stage in a process that began March 31 when seven U.S. manufacturers (Brooklyn Bedding, Corsicana Mattress Co., Elite Comfort Solutions, FXI Inc., Innocor Inc., Kolcraft Enterprises Inc. and Leggett & Platt Inc.) and two labor unions that represent workers at U.S. mattress producers (International Brotherhood of Teamsters and United Steelworkers) filed one countervailing duty petition against mattresses imported from China and seven antidumping petitions against the other countries.
The unfairly traded imports of mattresses are harming the U.S. mattress industry, costing U.S. manufacturing jobs and forcing the closure of mattress manufacturers, according to the petitioners. The petitioners calculate that mattress imports from the eight countries grew 32% from 2017 to 2019, from 4.6 million units to 6.1 million units.
The American Mattress Alliance, with about two dozen members, is a coalition of mattress importers and retailers that was formed in opposition to the petitions. Among other points, it argues that imports have grown at a much smaller rate than the petitions state and that imported mattresses aren’t being dumped in the U.S. market.
The International Sleep Products Association has not taken a position regarding the petitions but has provided statistics and information to both the petitioners and the importers.
So, that’s where we are. Yet in just these few paragraphs, we’ve mentioned a number of concepts that can be confusing, and the process used to determine whether antidumping or countervailing duties will be applied to mattresses coming into the United States from these countries is complicated. To provide accurate information to BedTimes readers, we’ve compiled this explainer of players, terms and timelines to help you better follow the progress of the current petitions and understand future actions.
The Decision Makers and Enforcers
U.S. Department of Commerce: This is one of two federal agencies that investigates and makes determinations regarding antidumping and countervailing duty petitions. The process is handled through Commerce’s International Trade Administration, which enforces U.S. trade laws and compliance with trade agreements negotiated on behalf of U.S. industry. Commerce determines whether dumping or subsidization has occurred and has no role in determining whether imports are injuring the U.S. industry.
U.S. International Trade Commission: This is the second federal agency that investigates and makes determinations regarding antidumping and countervailing duty petitions. Specifically, the ITC investigates and determines whether a U.S. industry is materially injured or threatened with material injury because of dumped or subsidized imports. The ITC has no role in determining whether those import were dumped or subsidized.
The bipartisan ITC is led by six commissioners nominated by the president and confirmed by the U.S. Senate, but currently has only five members (three Democrats and two Republicans). Commissioners serve overlapping terms of nine years, with new terms beginning every 18 months. In the case of a tie vote, the determination goes in favor of U.S. manufacturers.
U.S. Customs and Border Protection: CBP enforces antidumping and countervailing duty orders by, among other actions, collecting deposits; assessing and collecting final duties; and enforcing duties on imports that evade antidumping and countervailing duty orders.
Dumping: Dumping occurs when a foreign manufacturer or exporter sells a product in the United States at a price below its “normal” or “fair” value (sometimes abbreviated as LTFV for “less than fair value”). This value can be determined in several ways, including using the price at which the foreign producer sells the product in its own domestic market or the price at which the foreign producer sells the item in a third-country market. If no home or third-country market prices exist, or if those prices are below the foreign producer’s total costs, fair value also can be calculated based on production costs plus an amount of profit.
The current seven antidumping petitions allege the following dumping margins by one or more companies in these countries: Cambodia 708.10%, Indonesia 706.28%, Malaysia 47.97%, Serbia, 191.09%, Thailand 773.49%, Turkey 620.07% and Vietnam 1,008.28%. (The margin of dumping is the difference between the fair value and the export price of the goods, and like here, usually is expressed as a percentage of the export price.)
Subsidies: While dumping products in the U.S. market is done by foreign manufacturers or exporters, subsidies are provided by foreign governments or other foreign entities when they support businesses or industries by providing financial assistance, such as direct cash payments, tax credits or loans at terms that aren’t reflective of market conditions. As the CBP website explains, “to be countervailable, a subsidy must involve a government financial contribution that confers a benefit that is specific to a certain enterprise, industry or region in that country or that is contingent upon export or the use of domestic goods over imported goods in production.”
Antidumping duties: Often abbreviated to AD or ADD, antidumping duties are an additional duty placed on imported goods to offset the difference between the fair value of that good (see definition of “dumping” above) and the lower (dumped) price it was sold for in the United States. Because antidumping duties are collected by CBP when the goods enter the United States, the duty usually is expressed as a percentage of the price of the imported good. Although individual companies are responsible for dumping imported goods, when antidumping duties are imposed, duties are set for those companies named in the petition, as well as all other companies in that particular country exporting similar goods to the United States.
Countervailing duties: Often abbreviated to CVD, a countervailing duty is an additional duty placed on imported goods that is equivalent to the amount of subsidy the foreign producer of the goods has received from a foreign government or other foreign entity. Like antidumping duties, a countervailing duty is collected by CBP and usually is expressed as a percentage of the price of the imported good.
Petitions: U.S. companies or other interested parties, such as unions and trade associations, may file antidumping and countervailing duty petitions, and one or both can involve multiple countries. Petitions are filed on behalf of an industry and must meet specific criteria to demonstrate that petitions are supported by certain percentages of companies and workers of the domestic industry.
Petitions against unfairly traded imports aren’t uncommon. Hundreds of these cases have been filed against dozens of products since 2000. For example, a separate antidumping investigation into imported mattresses from China concluded in November 2019 when the ITC found that mattress imports from China were materially injuring the U.S. mattress industry and that those imports were being sold at dumping margins ranging from 57% to more than 1,700%.
The process of investigating and issuing findings, or “determinations,” gets complicated so bear with us. It involves two federal agencies (plus a third that enforces their orders) and several stages, which sometimes overlap. Deadlines noted here are statutory but the agencies have authority to extend them under certain conditions and circumstances and often do, so we’ve also included broader time frames in which actions typically occur. Determinations, notices and deadlines throughout the process are published in the Federal Register.
The process typically starts with the petitioners filing petitions simultaneously (on the same day) with both the U.S. Department of Commerce and the U.S. International Trade Commission. (Remember that petitions are filed by companies or groups but on behalf of a U.S. industry.) Within Commerce, the related investigations and determinations are carried out by its International Trade Administration, and some explanations of the process refer only to the ITA. For clarity and to avoid alphabet soup in this article, we’re using the shorthand of Commerce and ITC, rather than ITA and ITC, or USITC as ITC sometimes appears. (See how quickly we can serve up alphabet soup?)
Commerce begins by reviewing the petition to determine if it contains sufficient and relevant information, and it has 20 days to do so. If Commerce determines the petition is inadequate, the petition is denied and the proceedings end.
If Commerce determines the petition can move forward, the ITC begins its work of investigating whether a “reasonable indication” exists that the U.S. industry is being injured or is being threatened with injury because of the potentially dumped or subsidized imports. This is called the ITC’s preliminary investigation.
The ITC has 45 days from the date of the petition filing to make its preliminary finding. If it finds there is a “reasonable basis to believe or suspect” the U.S. industry has suffered material injury or is threatened with material injury, Commerce conducts its own preliminary investigation. If the ITC finds no injury, investigations by both agencies end.
Commerce’s preliminary investigation focuses on whether the goods in the petition are being sold below fair value or if they are being unfairly subsidized by a foreign government. U.S. law sets deadlines for Commerce to complete its preliminary investigations, but also allows Commerce to postpone those deadlines by a specific number of days, which it routinely does. If we assume for simplicity that Commerce postpones these deadlines to the full extent allowed by law, then it will make its preliminary antidumping determination approximately 115 days after the ITC’s preliminary determination, and its countervailing duty determination approximately 40 days after the ITC’s preliminary determination. Based on these assumptions, Commerce’s countervailing duty determination in the China mattress case is expected this summer. Its antidumping determinations against the other seven countries are expected in October.
At the end of its preliminary investigation, Commerce can make either an affirmative (dumping or subsidization has occurred) or negative (no dumping or subsidies has been found) determination — either way the investigation continues. However, if during this stage, Commerce finds a “reasonable basis to believe or suspect” dumping or the existence of subsidies, it will estimate the amount and direct CBP to begin to collect bonds or cash deposits from importers. In the current mattress antidumping investigations, deposits would be collected on future imports in the amount of the dumping margins. In the countervailing duty case against China, CBP would collect duties on future imports in an amount that offsets the value of the unfair subsidies.
These preliminary duties can be imposed retroactively for up to 90 days if “critical circumstances” exist. Commerce may find critical circumstances do exist if there has been a surge in imports of the investigated products before Commerce’s preliminary determinations and the amounts of dumping or subsidization are significant. If Commerce were to find critical circumstances in the mattress antidumping investigations, then the retroactive duties could be applied to goods that entered the United States July through September.
Commerce then has 75 days after its preliminary determination to make a final determination regarding whether the imported goods are being dumped or subsidized. If it finds in the negative, the investigation ends.
If Commerce finds in the affirmative, the ITC will make a final determination about whether the U.S. industry is materially injured or threatened with material injury. The ITC is supposed to make its final determination 120 days after Commerce’s preliminary determination or 45 days after Commerce’ final determination, whichever is later. (Typically the process takes 45 to 75 days.)
The ITC’s final investigation is different from its preliminary investigation in at least two respects: The legal standard that the petitioners must meet is higher and the ITC’s investigation is more thorough.
Among the economic factors the ITC considers at this stage are the U.S. industry’s production levels, sales, employment and profits. If the ITC finds no injury, the investigation ends. If the ITC finds that the U.S. industry was materially injured or threatened with material injury, Commerce then issues final antidumping or countervailing duty orders (or both), which also can be applied retroactively. The duties are collected and enforced by CBP.
In the case of the current mattress petition against Chinese subsidies, any countervailing duties ordered by Commerce would be in addition to the antidumping duties currently collected on mattresses imported from China as a result of the separate case concluded in 2019.
After the Final Determinations
Once final antidumping or countervailing duties are imposed, the petitioners, foreign producers and exporters can request a review each year to increase, reduce or eliminate the duties.
And every five years, Commerce and the ITC must conduct a “sunset review” of each antidumping and countervailing duty order. Similar to the original investigation, Commerce determines if the dumping or subsidies would likely resume if the order is revoked, and the ITC determines whether injury to the domestic industry would resume if the order is lifted. Based on the results of the sunset reviews, the order may be revoked or may be left in place for at least another five years.
Finally, it is not unusual for U.S. industries to file new antidumping or countervailing duty petitions after the successful conclusion of other trade cases, in part, because, once duties are imposed on imports from certain countries, dumped and subsidized imports from other countries can start to appear in the U.S. market.
This article was drawn from a wide variety of sources, including those below. The links will take you to more detailed information on antidumping and countervailing duty petitions, investigations and duties.